HOME CARE PROVIDERS, INC. et al v. HEMMELGARN et al
Filing
42
ORDER ON DEFENDANTS' 13 & 29 MOTIONS TO DISMISS. The Court GRANTS Defendants', Kelly Hemmelgarn, Randall Snyder, Ingrid Miller, Sylvia Mathews Burwell, and Jerome Adams, Motions to Dismiss. The Court has determined that it is without jurisdiction to hear Plaintiffs' claims; therefore, the dismissal is with prejudice and judgment will be entered accordingly. (See order.) Signed by Judge Larry J. McKinney on 4/5/2016. (BGT)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
HOME CARE PROVIDERS, INC.,
NIGHTINGALE HOME HEALTHCARE,
INC.,
NIGHTINGALE HOSPICE CARE, INC.,
and DEV A. BRAR,
Plaintiffs,
vs.
KELLY HEMMELGARN,
RANDALL SNYDER,
JEROME M. ADAMS Commissioner of the
Indiana State Department of Health,
SYLVIA MATHEWS BURWELL Secretary
of the United States Department of Health
and Human Services, and
INGRID MILLER,
Defendants.
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No. 1:16-cv-00303-LJM-TAB
ORDER ON DEFENDANTS’ MOTIONS TO DISMISS
Defendant Sylvia Mathews Burwell, Secretary of the United States Department of
Health and Human Services (the “Secretary”) has moved to dismiss the claims brought
against it by Plaintiffs Home Care Providers, Inc., Nightingale Home Healthcare, Inc.,
Nightingale Hospice Care, Inc. (these three Defendants, collectively, “Nightingale”) and
Dev A. Brar (“Brar”) (all plaintiffs, collectively, “Plaintiffs”). Dkt. No. 13. The Secretary
argues that the Court lacks jurisdiction over Plaintiffs’ claims for multiple reasons. Dkt.
Nos. 14 & 33. Plaintiffs argue, among other reasons, that the Court has jurisdiction over
their claim for injunctive relief pursuant to Ex Parte Young, 209 U.S. 123 (1908), and its
progeny. Dkt. No. 26.
Further, Defendants Kelly Hemmelgarn (“Hemmelgarn”), Randall Snyder
(“Snyder”), Jerome M. Adams (“Adams”), Commissioner of the Indiana State Department
of Health (“ISDH”), and Ingrid Miller (“Miller”) (these defendants, collectively, “State
Defendants”) have also moved to dismiss Plaintiffs’ Complaint on similar grounds, namely
that Plaintiffs lack standing and/or the Court lacks jurisdiction. Dkt. No. 29 & 30. Plaintiffs
contend that the cases the State Defendants rely upon apply only to federal employees,
officer and agencies, not state actors and that they have been directly harmed by the
actions of the Defendants. Dkt. No. 38.
For the reasons stated herein, the Court GRANTS the Secretary’s and the State
Defendants’ Motions to Dismiss.
I. FACTUAL ALLEGATIONS & STATUTORY SCHEME
The Medicare Act, 42 U.S.C. § 1395 et seq., established a national program of
health coverage for the aged and disabled. Among other services, Medicare provides
coverage for a certain defined “home health services,” including “part-time or intermittent
nursing care,” which are furnished on a “visiting basis” by a home health agency to a
Medicare beneficiary in his or her home. 42 U.S.C. § 1395x(m) (home health services).
See also 42 U.S.C. §§ 1395x(o) (home health agency) & 1395bbb; 42 C.F.R. Part 484
(conditions for participation for home health agency). Among other responsibilities, the
Secretary oversees the Centers for Medicare & Medicaid Services (“CMS”), which
operates and administers the Medicare program.
Congress has authorized CMS to enter into agreements with state survey
agencies, such as the ISDH, to conduct periodic surveys of home health agencies to
determine compliance with the Medicare participation requirements.
42 U.S.C. §
1395aa(a). See also 42 C.F.R. §§ 488.10, 488.11, 488.20. CMS bases its determination
regarding continued participation in the Medicare program on the results of those surveys;
CMS is legally entitled to rely on those surveys to ensure that providers meet certain
standards. 42 C.F.R. §§ 488.11, 488.12. The Secretary, through CMS, has entered into
an agreement with ISDH that designates ISDH as the state survey agency responsible
for the performance of the certification functions created by the Act. Ind. Code § 16-2812-1. See also Advantage Home Health Care, Inc. v. Ind. State Dep’t of Health, 829
N.E.2d 499, 501 (Ind. 2005); Woodruff v. Wilson, 484 F. Supp. 2d 876, 880 (S.D. Ind.
2007). ISDH also ensures that providers comply with Indiana State regulations and
conduct surveys on Indiana’s behalf as well. See Advantage Home Health Care, 829
N.E.2d at 501 (explaining the process of ISDH’s inspection and the two reports that are
generated therefrom); see also Ind. Code § 16-27 et seq.
A home health agency may also voluntarily choose to participate in a CMSapproved accreditation program by a private accreditation organization. If the home
health agency passes the organization’s periodic accreditation surveys, then the
Secretary may “deem” the home health agency to meet Medicare’s conditions of
participation, as opposed to being certified through a State or CMS survey. 42 U.S.C. §
1395bb; 42 C.F.R. § 488.6.
However, the Secretary’s relationship with a private
organization is not the same as its relationship with a State survey agency. A state
agency may still conduct “validation surveys” to validate the integrity of the private
accreditation process, and complaint surveys. 42 U.S.C. § 1395aa(c); 42 C.F.R. § 488.7.
If a state survey finds noncompliance with a condition of participation, the home health
agency is placed under the survey jurisdiction of the state agency until it returns to
substantial compliance or is terminated. 42 C.F.R. § 488.8(d) – (e).
If a health care provider is failing to meet Medicare requirements, then the
Secretary, through CMS may terminate the providers’ participation in the Medicare
program. 42 U.S.C. § 1395cc(b)(2). See also 42 C.F.R. § 489.53(a). Providers may
then appeal CMS’s determination through the administrative appeal procedure set forth
in 42 C.F.R. Part 498. See 42 C.F.R. § 498.3(b)(8). Under this administrative scheme,
the provider may seek review before an Administrative Law Judge, 42 C.F.R. § 498.40 et
seq., and then, if unsuccessful, the provider may appeal to the Departmental Appeals
Board, 42 C.F.R. § 498.80 et seq. The Departmental Appeals Board decision constitutes
the Secretary’s “final decision.” 42 C.F.R. § 498.90.
A dissatisfied provider is entitled to “judicial review of the Secretary’s final decision
after such hearing as is provided in section 405(g).” 42 U.S.C. § 1395cc(h)(1); 42 U.S.C.
§ 405(g) (“Any individual, after any final decision of the Secretary made after a hearing to
which [it] was a party . . . may obtain a review of such decision by a civil action
commenced within 60 days after the mailing to [it] of notice of such decision.”).
As noted above, ISDH also issues a state survey report. Based on those findings,
ISDH has the authority to, among other penalties, revoke a provider’s license or impose
civil money penalties. Ind. Code. § 16-27-1-12 (for a home health agency); Ind. Code §
16-25-5-3 (for a hospice). If ISDH revokes a provider’s license or imposes one of the
other penalties under Indiana Code § 16-27-1-12 or Indiana Code § 16-25-5-3, the action
is reviewable under Indiana’s Administrative Orders and Procedures Act (“IAOPA”),
Indiana Code § 4-21.5 et seq. See Ind. Code § 16-25-5-6.
Nightingale is a “home health agency” that has been in operation for twenty years.
Compl. ¶¶ 7, 9, 26. As a “home health agency,” Nightingale is classified as a “provider”
of services under the Medicare program and has participated in the Medicare program.
See, generally, Compl.; 42 U.S.C. § 1395x(u); 42 C.F.R. § 498.2. Nightingale is owned
by Brar. Compl. ¶¶ 5,6.
In the Fall of 2015, surveyors from the ISDH conducted complaint surveys at a
Nightingale facility and made findings regarding patient health and safety. Compl. ¶¶ 4850.
See also 42 C.F.R. § 484.10 et seq.
Based on these findings, CMS notified
Nightingale that it was terminating Nightingale’s participation in the Medicare program.
Compl. ¶¶ 54, 56. Nightingale has initiated an administrative appeal of that determination
under 42 C.F.R. Part 498, which is pending. Compl. ¶¶ 55-56.
One of the Nightingale entities has also filed for bankruptcy and is challenging the
Medicare reimbursement termination through an adversary bankruptcy action
(“Bankruptcy Action”). See In re Nightingale Home Healthcare, Inc., Case No. 1-1510099-JMC-11 (Bankr. S.D. Ind.); Nightingale Home Healthcare, Inc. v. Burwell, Case
No. 1-15-50340-JMC-11 (Bankr. S.D. Ind.). In the Bankruptcy Action, Nightingale sought
“a temporary restraining order or preliminary injunction and final injunctive relief enjoining
the Defendants from terminating Nightingale’s participation in the Medicare and Medicaid
programs until its challenges to the Defendants’ actions have been heard and decided by
an administrative law judge . . . .” In re Nightingale Home Healthcare, Inc., Case No. 115-10099-JMc-11, Dkt. No. 1, Compl. ¶ 62. The Bankruptcy Court issued a preliminary
injunction pending an administrative appeal of Nightingale’s termination. See Nightingale
Home Healthcare, Inc. v. Burwell, Case No. 1-15-50340-JMC-11; United States v.
Nightingale Home Healthcare, Inc., Case No. 1:16-cv-00317-LJM-TAB, Dkt. No. 5.
Plaintiffs have sued the Secretary in her “official capacity” for injunctive,
prospective relief. Compl. ¶ 14. Plaintiffs claim that the Secretary violated the Due
Process Clause of the Fifth Amendment, the Equal Protection component of the Due
Process Clause of the Fifth Amendment, and the First Amendment of the United States
Constitution “[b]y ratifying the other Defendants’ actions . . . .” Compl., Counts I – V.
Plaintiffs asks the Court to enjoin CMS “from using the Indiana State Department of Health
to conduct further surveys,” and make it mandatory for the Secretary to use the services
of other surveyors “independent from the Indiana State Department of Health and CMS.”
Compl. at 18, ¶¶ 1(b) & 1(c).
Plaintiffs allege that Defendants Hemmelgarn and Snyder abused the survey
process in that they have harassed, discriminated against, intimidated and retaliated
against Brar on the basis of race, Plaintiffs’ exercise of First Amendment rights and
personal dislike of Brar and/or his companies. Compl. ¶¶ 30-53. Plaintiffs assert the
State Defendants “under color of State law, subjected and continue to subject Dr. Brar
[and Nightingale] to a deprivation of rights secured by the Constitution and laws of the
United States,” Compl. ¶ 61, and that Plaintiffs have suffered and continue to suffer
grievous and irreparable harm as a result of such conduct. Compl. ¶ 63. Plaintiffs assert
that the State Defendants have violated the Due Process Clause of the Fifth Amendment,
the Equal Protection component of the Due Process Clause of the Fifth Amendment, and
the First Amendment of the United States Constitution “[b]y ratifying the other Defendants’
actions . . . .” Compl., Counts I – V. Plaintiffs seek an injunction to prevent the State
Defendants from conducting further surveys, or that the State Defendants may conduct a
survey only “in case of a bona fide, third-party complaint alleging facts likely to constitute
an immediate threat to the health and well-being of patients.” Compl. at 18, ¶ 1a. Plaintiffs
also seek an order directing the State Defendants to withdraw survey reports they have
submitted to CMS since January 1, 2015. Compl. at 18, ¶ 1(d). The Complaint also
requests money damages from all Defendants as well as an award of costs and attorneys’
fees pursuant to 42 U.S.C. § 1988. Compl. at 18-19, ¶¶ 2 & 3.
II. STANDARDS
Under either Rule 12(b)(1) or 12(b)(6) of the Federal Rules of Civil Procedure
(“Rule 12(b)(1) or 12(b)(6)”), the Court must accept as true all well-pleaded factual
allegations and draw all reasonable inferences in favor of Plaintiffs. See Esekiel v. Michel,
66 F.3d 894, 897 (7th Cir. 1995). Documents central to the Complaint and referred to in
it as well as information that is properly the subject of judicial notice may also be
considered. See Williamson v. Curran, 714 F.3d 432, 436 (7th Cir. 2013) (citing Geinosky
v. City of Chicago, 675 F.3d 743, 745 n.1 (7th Cir. 2012) (further citation omitted)). Further,
the Court “may properly look beyond the jurisdictional allegations of the complaint and
view whatever evidence has been submitted on the issue to determine whether in fact
subject matter jurisdiction exists.” Esekiel, 66 F.3d at 897 (quoting Capitol Leasing Co.
v. Fed. Deposit Ins. Corp., 999 F.2d 188, 191 (7th Cir. 1993) (per curium) (further citations
omitted)).
Under the Supreme Court’s directive in Bell Atlantic Corp. v. Twombly, 550 U.S.
544 (2007), to survive Defendants’ motions to dismiss for failure to state a claim upon
which relief may be granted, Plaintiffs must provide the grounds for their entitlement to
relief with more than labels, conclusions or a formulaic recitation of the elements of a
cause of action. Id. at 555 (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). The
“allegations must be enough to raise a right to relief above the speculative level.”
Id.
The touchstone is whether the Complaint gives the Defendants “fair notice of what the …
claim is and the grounds upon which it rests.” Id. (quoting Conley v. Gibson, 355 U.S. 41,
47 (1957)). Legal conclusions or conclusory allegations are insufficient to state a claim
for relief. McCauley v. City of Chicago, 671 F.3d 611, 617 (7th Cir. 2011).
III. DISCUSSION
As against the Secretary, Plaintiffs contend that they are seeking only prospective
relief for ongoing constitutional violations; therefore, the Court has jurisdiction to entertain
their claims. Dkt. No. 26 at 1-2. Specifically, the sovereign immunity defense does not
apply to suits for injunctive relief against the Secretary. Id. at 2-5 (citing, inter alia, Vance
v. Rumsfeld, 701 F.3d 193, 202 (7th Cir. 2012); Rose Acre Farms, Inc. v. Madigan, 956
F.2d 670, 673 (7th Cir. 1992); Gautreaux v. Romney, 448 F.2d 731 (7th Cir. 1971); Ex
Parte Young, 209 U.S. 123 (1908)).
Further, there is no “personal participation”
requirement in an official capacity claim. Id. at 5-7 (citing, inter alia, United States v.
Windsor, 133 S. Ct. 2675 (2013); Califano v. Westcott, 443 U.S. 76 (1979); Bolling v.
Sharpe, 347 U.S. 497 (1954); Thomas v. Watts, No. 2:11-cv-00187-JMS-WGH, 2013 WL
3043686 (S.D. In. June 17, 2013)). Finally, Plaintiffs state that their claim against the
Secretary is not governed by 42 U.S.C. § 405, because it seeks to enjoin ongoing
misconduct by the State Defendants, which they claim the Secretary has the power to
stop. Id. at 7-10. In fact, Plaintiffs continue, their challenge is “entirely collateral to its
substantive claim of entitlement to participate in the Medicare program,” and the Court
has jurisdiction. Id. at 8 (quoting GOS Operator, LLC v. Sebelius, 843 F. Supp. 2d 1218,
1229 (S.D. Ala. 2012); citing Mathews v. Eldridge, 424 U.S. 319, 328 (1976)). It is clear,
Plaintiffs argue, that they do not seek to recover Medicare reimbursement; therefore, their
standing does not turn on provisions of the Medicare Act. Id. at 10-11.
As against the State Defendants, Plaintiffs state that they allege unconstitutional
targeting and harassment on the basis of Brar’s race or national origin, unlawful targeting
and harassment based on personal dislike or other irrational reasons, retaliation for
seeking redress of grievances, denial of due process and illegal search of Plaintiffs’
business premises. Dkt. No. 38 at 2 (citing Counts I-V of the Complaint). Further,
Plaintiffs similarly argue that the relief they seek is to have independent, rather than ISDH
surveyors, perform any future surveys except in cases of a bona fide third party complaint
alleging an immediate threat to the health and well-being of patients, for an order that the
State Defendants withdraw survey reports submitted to CMS since January 1, 2016
emphasis added), and for money damages for unconstitutional targeting and harassment
based on race or national origin and other impermissible reasons. Dkt. No. 38 at 2-3.
Plaintiffs claim that they seek only prospective relief and are not challenging the
Secretary’s decision, or the underlying reports supporting the decision, to terminate
Nightingale’s Medicare status. Id. at 3.
The Secretary argues that, notwithstanding Plaintiffs’ attempts to characterize their
claims for relief otherwise, any equitable decision by this Court to change the process for
reviewing Plaintiffs’ eligibility to participate in Medicare is inextricably intertwined with
standards and rights created by and under the Medicare Act; therefore, Plaintiffs’
exclusive remedy is under the Act through the appeals process. Dkt. No. 33 at 4-7 (citing,
inter alia, Heckler v. Ringer, 466 U.S. 602 (1984); Affiliated Prof’l Home Health Care
Agency v. Shalala, 164 F.3d 282, 284 (5th Cir. 1999); Bodimetric Health Servs., Inc. v.
Aetna Life & Cas., 903 F.2d 480, 488-89 (7th Cir. 1990)). Moreover, the Secretary asserts
that there is no basis through which it would be proper for the Court to circumvent § 405(g)
under Ex Parte Young. Id. at 2-4, 8-13 (citing, inter alia, Shalala v. Ill. Council on Long
Term Care, Inc., 529 U.S. 1, 10 (2000); Weinberger v. Salfi, 422 U.S. 749, 760-61 (1975)).
The State Defendants’ argument is similar. First, the State Defendants argue that
Plaintiff lack standing because they have failed to allege any injury and to the extent that
they have alleged an injury, they must first exhaust their administrative remedies pursuant
to Indiana Code § 4-21.5 et seq.
Dkt. No. 30 at 9-10, 13-14.
Second, the State
Defendants argue that 42 U.S.C. § 405(h) deprives this Court of subject matter jurisdiction
because all claims that “arise under” the Medicare Act must be exhausted under the
administrative process before judicial review is appropriate. Id. at 11-13. Third, the State
Defendants argue that as to Plaintiff Nightingale Home Health Care, Inc., the Court should
judicially estop it from bringing any claim because this lawsuit was not listed as an asset
on its Bankruptcy Petition. Id. at 15-16. Fourth, the State Defendants contend that
Plaintiffs have failed to provide sufficient factual basis to hold each of them individually
liable.
Id. at 16-18.
Finally, the State Defendants challenge the sufficiency of the
allegations as to Counts I, Equal Protection; IV, Procedural Due Process; and V, Unlawful
Search and Seizure. Id. at 18-21.
The Court agrees with the Secretary and the State Defendants that the relief
sought by Plaintiffs in this case must be subject to exhaustion under § 405(h). In the first
instance, Plaintiffs cannot and do not deny that the relief they seek is to change the review
procedure used for their facilities. It is clear that this review and oversight process is set
forth in the Act and regulations promulgated by the Secretary under the Act and even
provides for instances in which the Secretary may use a service other than CMS and a
state agency. See 42 U.S.C. §§ 1395x(m), 1395x(o), 1395bbb, 1395aa(a), 1395bb,
1395aa(c), & 1395cc(b); 42 C.F.R. §§ 488.6, 488.7, 488.8, 488.10, 488.11, 488.12,
488.20, 498.3, 498.40, 498.80 & 498.90. In a case that challenges the procedures
undertaken by the Secretary with respect to regulation of a Medicare provider, 42 U.S.C.
§ 1395ii channels all claims arising under the Act to an administrative process exclusively:
“No findings of fact or decision of the [Secretary] shall be reviewed by any person, tribunal
or governmental agency except as herein provided;” and “[n]o action against [the
Secretary] shall be brought under section 1331 or 1346 of title 28 to recover on any claim
arising under this subchapter.” 42 U.S.C. § 405(h). That Plaintiffs have claimed that their
Constitutional rights have been violated does not change the analysis because the
Secretary has the authority to review such a challenge. Accord Ill. Council, 529 U.S. at
13-14 (concluding that a certain nursing homes’ challenge to provisions of the Medicare
Act as unconstitutional are subject to the administrative procedure in § 405(h); Salfi, 422
U.S. at 761 (concluding that allegations of due process and equal protection violations in
the Social Security context could not proceed under § 1331); Ringer, 466 U.S. at 614-15,
621-22 (concluding that § 405(h) applies where “both the standing and the substantive
basis for the presentation” of the claim is the Medicare Act). Moreover, the relief Plaintiffs
seek in the Complaint is withdrawal of several surveys that formed the basis for
termination of their status. As such, their claims must first be addressed through the
administrative process.
Even if the challenge is prospective as Plaintiffs argue, this Court will not be able
to make a determination as to the merits unless it looks at the past and current decisions
by the State Defendants under the auspices of the Medicare Act. As a result, any
allegedly unrelated issues are inextricably intertwined with and un-severable from the Act.
Plaintiffs seek to have the Court order the Secretary to proceed with her duties under the
Medicare Act in a certain manner; therefore, any determination must arise under the Act;
therefore, Plaintiffs must first exhaust their administrative remedies under § 405(h). See
Ringer 466 U.S. at 615-16.
Plaintiffs’ reliance on Ex Parte Young with respect to the Secretary is also
misplaced. There is no evidence that Plaintiffs are left with no options. In fact, they are
challenging the Secretary’s decision in two forums. Under this circumstance, the Court
will not apply the Ex Parte Young doctrine. Accord Armstrong v. Exceptional Child Ctr.,
Inc., ___ U.S. ___, 135 S. Ct. 1378, 1387, 191 L. Ed. 2d 471 (2015).
Furthermore, with respect to the individual State Defendants, the barebones
allegations of racial discrimination in the Complaint is insufficient under Iqbal, 556 U.S. at
678. For example, there are no factual allegations that other providers of any race have
been treated differently by any of the Defendants; nor are there any facts from which the
State Defendants can determine on which date negative survey results were racially
motivated. Similarly, there is no factual support for the proposition that the number of
survey’s performed at Plaintiffs’ facilities were excessive or in any other way
discriminatory because no numbers are provided for Plaintiffs’ facilities or any other
similarly situated facility. In the same vein, there are no facts from which to conclude that
the State Defendants impermissibly entered Plaintiffs’ hospice facility to perform an
inspection pursuant to state law. See Ind. Code §§ 16-25-3-6 (initial survey for licensure);
16-25-5-4 (complaint survey); 25-5-2.5 (minimum survey requirements); 16-25-5-5
(investigation of unlicensed hospice).
Moreover, with respect to Nightingale’s assertion that the State Defendants have
“ignored and violated required procedures for Medicare surveys” that deprived Plaintiffs
of some liberty or property interest in their Medicare status in violation of the due process
clause of the Fourteenth Amendment, Compl. ¶ 75, the Court agrees with the State
Defendants that, to the extent such a liberty or property interest exists, the administrative
review process provides Plaintiffs a remedy and they are not entitled to a predetermination hearing. See Bryn Mawr Care, Inc. v. Sebelius, 749 F.3d 592, 603 (7th Cir.
2014); Northlake Cmty. Hosp. v. United States, 654 F.2d 1234, 1242 (7th Cir. 1981).
IV. CONCLUSION
For the reasons stated herein, the Court GRANTS Defendants’, Kelly
Hemmelgarn, Randall Snyder, Ingrid Miller, Sylvia Mathews Burwell, and Jerome Adams,
Motions to Dismiss. The Court has determined that it is without jurisdiction to hear
Plaintiffs’ claims; therefore, the dismissal is with prejudice and judgment will be entered
accordingly.
IT IS SO ORDERED this 5th day of April, 2016.
________________________________
LARRY J. McKINNEY, JUDGE
United States District Court
Southern District of Indiana
Distribution attached.
Distribution:
Arend J. Abel
COHEN & MALAD LLP
aabel@cohenandmalad.com
Irwin B. Levin
COHEN & MALAD LLP
ilevin@cohenandmalad.com
TaKeena Monette Thompson
COHEN & MALAD, LLP
tthompson@cohenandmalad.com
Jennifer Elizabeth Lemmon
INDIANA ATTORNEY GENERAL
jennifer.lemmon@atg.in.gov
Maricel E.V. Skiles
INDIANA ATTORNEY GENERAL
maricel.skiles@atg.in.gov
Betsy M. Isenberg
OFFICE OF THE ATTORNEY GENERAL
Betsy.Isenberg@atg.in.gov
Jill Z. Julian
UNITED STATES ATTORNEY'S OFFICE
jill.julian@usdoj.gov
Shelese M. Woods
UNITED STATES ATTORNEY'S OFFICE
shelese.woods@usdoj.gov
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